WASHINGTON — The high volatility in the nation’s trading markets is “nauseating,” said Shad Rowe, general partner of the Dallas private investment firm Greenbrier Partners Ltd.

“There are predatory people in the market making life miserable for everybody — people anticipating orders, running in front of them to get there a trillionth of a second earlier,” Rowe said.

Daily swings of 200 or more points in the Dow Jones industrials are happening more often. Analysts trying to explain this volatility often point to European debt, economic uncertainty and political brinksmanship in Washington.

But today’s investment landscape is dominated by high-frequency trading. If the New York Stock Exchange handles 5 billion trades a day, more than 3 billion of those are done by computers programmed with high-speed trading algorithms.

High-frequency traders try to anticipate trends, take profit on short bursts of activity and get out by the end of the day with no net positions. New York’s largest banks use the strategy. So do traders in Austin with RGM Advisors LLC.

Edgar Perez, who has written a book about speed trading and organizes networking events for high-frequency traders, said they are the “Lady Gagas” of trading.

Hong Kong has discouraged high-frequency trading with a transaction tax. The European Union has proposed a similar fee that is meeting strong resistance.

‘Flash crash’

When leaders of the world’s largest economies gather next month in Cannes, France, for the G20 summit, their agenda will include regulating high-frequency trading so it doesn’t light a wildfire across the globe like the May 6, 2010, “flash crash.”

The Securities and Exchange Commission last week proposed a set of circuit-breaker rules designed to help humans catch up with computers. Trading would stop on the New York Stock Exchange for 15 minutes if the overall market value falls from the previous day’s closing by 7 percent or more. A fall of 20 percent or more would close the market for the day.

The Dow Jones industrials fell more than 1,000 points, then rose again in less than 30 minutes in the flash crash as sell orders raced ahead of liquidity.

Perez called the proposed rules “improvements to the racetrack.”

Cascading shocks

Ted Day, a finance professor at the University of Texas at Dallas School of Management, said it’s understandable that average investors fear the computing muscle of these firms.

“It’s almost as though they’re playing blackjack at the casino and are able to count the cards,” he said. “But every trade they do isn’t a profitable trade. Even though statistically, most of the time, the market seems to work like their models predict, over short periods of time, they still have to make adjustments to what they’re doing. If they’re wrong, they can lose a very great deal of money.”

The International Organization of Securities Commissions, based in Madrid, published a report in July urging the G20 nations to get a handle on high-frequency trading’s risks to the global financial system. One concern cited is that high-frequency trading may instantly cascade shocks from one market to another — between countries and from equities to commodities to foreign exchange.

From an average investor’s standpoint, high-frequency trading favors traders with the biggest computers and fanciest software, raising suspicions that speed and smarts can translate into near-instantaneous access to information.

“The volatility and price movements are accentuated by the fact that you’ve got short-term traders moving big quantities of capital around trying to beat each other to the punch,” Day said.

“I don’t see anything inherently unfair about buying the latest computer,” Day said. “But someone with information about another investor’s trade getting that order executed more quickly? That would be totally unfair.”